ASIC fires another shot at private credit to ‘wholesale clients’

Mike Taylor

Managing Editor and Publisher

22 September 2025

Just a few days after placing an interim stop order on two La Trobe private credit funds and amid criticisms of Metrics, the Australian Securities and Investments Commission (ASIC) has released new critical research of private credit in Australia.

The research paper, released today, has found positives in the private credit sector but has also pointed to problems, particularly those segments of the market targeting wholesale investors.

The report highlights four key areas of operation requiring improvement:

• Conflicts of interest including free incentives and related party transactions’
• Fees and remuneration including disclosure gaps
• Terminology including referencing invest grade without formal ratings agency involvement

It said funds with large superannuation and institutional investment, and the best international private credit managers operating in Australia, generally demonstrate sound governance, and transparent valuation and fee practices.

However, it then said “segments of the market targeting wholesale investors using the ‘sophisticated investor’ exemption and retail-based offerings, including platforms, have practices that do not compare favourably against international practice”.

“Lenders in these segments are more likely to have conflicts of interest, opaque fee and interest margin arrangements, inconsistent and non-independent valuation methodologies, and ambiguous terminology,” ASIC said.

“These practices are more prevalent in real estate–based funds. We have noted some improvement in practices over the past 12 months, as international managers have invested into local managers.”

The ASIC report assessment said that investors in private credit are mostly appropriately rewarded for “taking sub-investment grade credit risk and maturity/liquidity risk”.

“However, these risks are not always adequately described in offer documents and subsequent performance reporting,” it said.

“While we have not assessed the systemic risk to the Australian financial system from private credit, we note the concentration in real estate construction and development finance, which has represented the majority of credit losses in past economic downturns in Australia and overseas.

“This segment of the market may present as a systemic risk for small and self- managed superannuation funds and ‘sophisticated’ investors in a downturn,” the ASIC assessment said.

“The concentration of Australia’s private credit market in higher-risk real estate construction and development is where we see the greatest area for improvement for investor protection and market integrity,” the report said. “This market segment has a higher concentration of investors using the wholesale sophisticated investor exemption, and with less transparency on conflicts of interest, manager remuneration disclosure, and valuations and portfolio reporting.”